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THE ALLIANCE OF ALCOHOL INDUSTRY ATTORNEYS & CONSULTANTS

How does the sales tax holiday work for restaurants and bars?

Written by Brad Dawson on . Posted in Will Cheek's Last Call Blog.

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Jul 23, 2020

Beginning 12:01 a.m. on Friday, Aug. 7 and ending 11:59 p.m. on Sunday, Aug. 9, Tennesseans can enjoy food and drink at their favorite restaurant — without paying sales tax.  We have been hearing lots of questions:

What types of businesses are included?
Are liquor by the drink taxes exempt? 
How do I file my tax return for sales without taxes? 

The law specifically applies to the retail sale of food and drink by restaurants and limited service restaurants, as defined in state law.  The holiday does not apply to hotels, premier type tourist resorts, caterers and other special license types.  The holiday also does not apply to breweries, distilleries and beer bars, unless the establishment holds a restaurant or limited service license.  And no holiday for wine and beer sales at groceries, C Stores and liquor stores.

Look at your license on the wall.  If the license says restaurant or limited service license, the sales tax holiday applies to your sales.  If it does not, you must collect and pay over sales tax.  Samples of restaurant and limited service licenses are at the links.

Failure to pay taxes means that you could be liable for back taxes, plus penalties and interest.

What’s in a name?  For the tax-free holiday weekend, the name says it all:  Sales Tax Holiday. 

Just like the name implies, the holiday only applies to sales tax.  You must collect and pay over liquor by the drink taxes.

Because this is the first sales tax holiday for restaurants, please take some time to ensure that you properly fill out the sales tax return.  List exempt sales for the holiday on your sales tax return at Schedule A, Line 10.  See this sample return. 

All this talk of holidays has us humming one of our favorite yuletide carols: Holiday in Cambodia by the Dead Kennedys.

It’s a holiday in Cambodia

It’s tough, kid, but it’s life

It’s a holiday in Cambodia

Don’t forget to pack a wife

As a bonus, sales of apparel are tax exempt. Sell all your hats, shirts, boxers – you name it.

Apparel sales are tax exempt  Friday, July 31 through Sunday, August 2 and Friday, Aug. 7 through Sunday, Aug. 9. Yes, breweries, distilleries and wineries qualify for the sales tax exemption for apparel.

My daughter Ella is looking forward to showing off her Whiskey Defender shirt featuring Nelson’s Greenbrier distillery cat Sugar Maple. Forget the high school dress code, right?

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